At Wednesday’s Monetary Policy Committee (MPC) meeting, the National Bank of Georgia (NBG) decided to raise the refinancing rate by 0.5 percentage points to 11%.
Increased risks of high inflation anticipations and inflation being above the target for a prolonged period of time were named as reasons for increasing the rate. The NBG also noted the MPC would keep a “tightening bias until the risks of rising inflation expectations are sufficiently mitigated.”
The Central Bank also stated that the ongoing conflict in Ukraine, as well as sanctions placed on Russia, have resulted in significant worldwide inflation, raising the cost of a variety of products on global markets.
Furthermore, it also noted “sharp increase” in fuel prices was expected to have a “substantial impact” on inflation by translating into higher inflation expectations. The Bank added that the trend would start to decrease from March but remain above the target during the year.
In February, the annual inflation rate was 13.7 percent.
The NBG said it was “continually monitoring” economic and financial market developments and would utilize “all available tools” to maintain price stability.
“The Bank noted that the credit activity is anticipated to be moderately high during this year, despite tightened monetary policy and current macroprudential measures,” the Bank noted.
In addition, the NBG lowered its prediction for Georgia’s economic growth in 2022 from 5% to 3-4 percent.
“Despite the predicted slowdown in economic growth, the inflationary pressure arising from the aggregate demand will be weak, and supply-side forces will continue to dominate throughout the year,” the Bank said.
The actual growth of Georgia’s gross domestic product climbed by 10.4 percent in 2021, whereas it increased by 18 percent year on year in the month of January this year.
As of March 1, according to the non-governmental organization Society and Banks, 191,800 loans with fluctuating interest rates were still active, totaling $8.55 million GEL ($2,780/€2,498).
The MPC’s next meeting will take place on May 11.